Thursday, 17 August 2017

The stated
aim of the UK Government in publishing ‘position papers’ in relation to Brexit
is to start providing some clarity about what the UK actually wants. On the basis of what they’ve come up with so
far, it appears that they’re really no clearer now than they were 14 months ago.

Amongst
their proposals to date are:

·There
should be a customs union which mirrors the existing one in all important
respects except that the UK uniquely should be free to negotiate different
trading arrangements with non-EU countries than those negotiated by the EU
itself, because ‘obviously’ a country with a market of 60 million and no trade
negotiators will get better deals than a market of 450 million with a host of
experienced negotiators.

·There
should be something called ‘regulatory equivalence’ under which the UK
basically mirrors all the EU regulations except that it also retains the right
to vary them as and when it chooses.

·There
should be completely frictionless trade between the EU and the UK except that
the UK should have the right to opt out of all the mechanisms and costs
involved in managing that trade.

It
amounts to little more than an elaboration of what we already knew – the UK still
expects both to have its cake and eat it, and any attempt by the EU27 to
prevent that will be portrayed as a deliberately punitive response. The Brexiteers continue to believe in the
fantasy that ‘they need us more than we need them’.

Yesterday,
we had the latest thinking (although that may be too grand a word) on the
question of the border between the UK and the Republic of Ireland. According to the Northern
Ireland Secretary, the proposal is entirely reasonable and should be
accepted because of the trade involved on all sides. This seems to be repeating the same mistake
that the UK Government has made from the outset – they have a deeply ingrained
mindset that tells them that trade is the only factor to be considered. Once again, they show themselves incapable of
understanding that for all the other EU countries there are a range of other
factors to be considered – it isn’t only about trade and economics. It’s a transactional approach to
international relationships which fails to grasp the wider motivations.

One
essential element of the proposals on Ireland appears to be a heavy dependence
on IT as a way of managing and controlling border crossings. The UK Government – of all colours and over
many decades – has an appalling record on delivery when it comes to large new
complex IT systems. They almost never
come in on time or budget (and closer examination of those that do claim to
have met the time and budget would almost certainly reveal that it’s often a result of ‘descoping’ –
delivering a lesser system than that original envisaged). That in itself doesn’t augur well; but in
this case, they’re talking about delivering a complex system the scope of which
has not yet been defined, let alone agreed, within a fixed and immutable
timescale. Still, it will generate some
good revenues and profits for one or two large IT companies, whose directors
are likely to be laughing all the way to the bank.

There
is, though, a cheap and easy way to maintain frictionless trade with the EU27,
to maintain regulatory equivalence, to retain a customs union, and to avoid a
hard border across Ireland. I wonder how
more position papers need to be ridiculed before they work out what that might
be…

Wednesday, 16 August 2017

Someone
once said that if the answer is ‘more politicians’, then the question must be a
very strange one indeed. A similar
feeling struck me over the past few days as I read about the speculation over
the next Tory leader and Prime Minister.
If Jacob Rees-Mogg is the answer, then what on earth is the question?

Tuesday, 15 August 2017

Many
years ago, I remember one independentista
telling me that he would be willing to eat grass if that were to be the cost of
Wales becoming independent. It’s rather
a fundamentalist position, and not one that I share. And it’s certainly not a case that I’d ever
be willing to put before the people of Wales in an attempt to persuade them to
support independence. There is a price
to independence of course – just as there is a price to not choosing
independence. And much as I might wish
it were otherwise, neither of those prices can ever be fully known in advance;
there is an element of faith on both sides.
Both sides can produce their own numbers ‘proving’ the truth of their
prior beliefs, but neither can ever actually be certain that they are right.

That
underlines the point that there is a more general truth underlying that
grass-eating argument; most of us are willing, in principle, to pay a price of
some sort for something which we believe to be of greater overall good than
mere material wealth. For example, I don’t
doubt that democracy costs more than dictatorship, and can often be more
decisive, but few of us would actually choose to live in a dictatorship purely
for a small reduction in taxes. In
principle, that idea that some freedoms are worth having even if they come at a
price is an entirely reasonable and honourable political position to take. The extent to which others can be persuaded
to support it will depend on how much they value those freedoms and how large
the price is, and both of those factors are legitimate issues of political debate.

I detect
an increasing tendency amongst those who led us down the Brexit path to adopt a
similar position, arguing in effect that freedom from what they portray as ‘interference’
from ‘Brussels’ is of value in its own right, even if it involves taking an
economic hit in the process. It’s certainly
more honest than their previous position of arguing that we were all going to
be better off, despite all the evidence to the contrary. The problem is, though, that it’s being
honest after the event. It also omits spelling
out that those taking that hit will not be themselves, but the rest of us. Honesty now is not enough to make up for
previous dishonesty, and the ‘people have spoken’ mantra is a wholly inadequate
defence.

Tuesday, 8 August 2017

There has been widespread coverage today of the release by
the UK Treasury of its estimate of the amount of money “sent to Brussels” each
week (£156 million), and the comparison between that and the headline figure on
the side of that infamous bus, which was £350 million. The i newspaper has an opinion
piece by John Redwood in which he makes a number of points in response. He glosses over the figure by saying that everyone
was aware “that a large sum of money was
at stake”, and that “the two sides
disagreed about just how large a sum it was”. Well, yes, they did indeed disagree about the
sum involved, but I’m not at all sure that the fact that the £350 million was
an outright and blatant can be glossed over by calling it ‘a disagreement about
the figure’.

Anyway, he (like others) makes the point that the real issue
was that “taking back control of our
money”, and “being able to spend our
money on our own priorities” were key issues for the Leave campaign. And in a related story
the Director of Get Britain Out makes the rather fluffy point that even £150million
per week “is clearly still at too much”
without advancing much by way of argument to explain why, or how much exactly
would have been acceptable. The problem
with all of this is that the assumption is being generally made that, after
Brexit, the UK will be free to spend this money – whatever the actual figure –
on things like the NHS and social care.
Put in simplistic terms – give the money to Brussels, or spend it on the
NHS – the attraction to many is obvious.

It’s not an honest choice, however, unless we first consider
what else we lose by not paying that money ‘to Brussels’ – because it isn’t
simply some sort of membership fee which simply disappears into the so-called
bureaucracy in the UE. Firstly, the UK
will need to replicate all the bodies which we currently share with the other
members of the EU on a collective basis; and the cost per head is likely to be
higher for unique UK institutions than it is for shared agencies. Then there are little matters such as payments
to farmers, and regional aid, the continuation of which the UK has conspicuously
declined to guarantee. Rather than 'NHS
vs Brussels', a more honest choice would be NHS vs Regional aid and farming
subsidies. Perhaps people would still choose
cuts to both of those in preference to EU membership, but at the moment the
reality of the choice that they think they've made isn’t even being made clear to them.

And, in reality, that’s no surprise. People like Redwood and Farage never suddenly
developed a deep commitment to paying for the NHS and social care; they merely
latched on to an argument that they thought – rightly so as turned out – would persuade
people to vote for something which would otherwise be seen to be against their
own best interests. And that’s the real
issue about the infamous £350 million for the NHS. It’s not just that the sum was a complete
lie, it’s also that the whole line of argument was a lie. The choice was never a real one, just a ploy to
achieve the aim of Brexit.

Monday, 7 August 2017

One of the problems
with simplistic political slogans is that turning them into reality never quite
matches the image that those targeted by the slogans took them to mean in the
first place. One obvious example, in
relation to Brexit, was “control of our borders”. It is increasingly obvious that what many of
those demanding this outcome meant was control of other people coming into the
UK; they certainly didn’t intend it to be reciprocal. Hence the outrage being increasingly expressed
by the tabloids about delays to holidaymakers entering other countries.

People who have,
for years, demanded a tightening of border controls are now complaining bitterly
about the delays which result from more stringent checks of passports and other
entry documents. But what does "controlling
the borders” mean if not paying more attention to who is entering a country and
whether they are who they claim to be?
It could be, of course, that what they really intended was for more
people to be employed to man the borders.
Perhaps it was all a giant job creation scheme for the border
agency. That might be a bit more credible
if the same tabloids hadn’t also spent years complaining about the ‘bloated
public sector’.

Personally, I suspect
that it is related to the long-standing tradition of British
exceptionalism. It’s not ‘freedom of
movement’ that they want to stop, it’s other people’s - foreigners’ – freedom of
movement. The traditional blue British
passport which they think they’re going to be getting back always asserted, as
I recall, the demand of ‘Her Britannic Majesty’ that the holder should be
allowed through without let or hindrance.
For some strange reason, however, those strange foreigners don’t see
things in the same way – they actually have the nerve to think that UK subjects
should be treated the same way as everyone else. Inevitably, this clear and logical outcome of
Brexit will be portrayed as yet another example of Brussels punishing the UK. Of course.

Friday, 4 August 2017

Could
it really be, as some in Brussels are starting to suspect,
that the UK’s apparently shambolic approach to Brexit is all a bluff, part of a
cunning plan to lull the EU27 into a false sense of security? Under this interpretation, it’s not that they
don’t have a strategy at all; it’s more that their strategy is one of
pretending not to have a strategy so that they can brilliantly blindside
everyone in a few months’ time.

I
can see why the rest of the EU might fear that this might be the case. And I can see why many in the UK might be
hoping it’s the case – it’s far better to believe that than to believe that the
government really is completely clueless.
But such an analysis goes against a variant of Occam’s razor. When in doubt, the simplest and most obvious
explanation (in this case, total cluelessness) is generally to be preferred.

And as
we learned from that master of philosophy and deception, Baldrick, cunning can
sometimes be a euphemism for extremely stupid.

Wednesday, 2 August 2017

On
Monday, the Tory group leader in the Assembly demanded that the First Minister
dissociate himself from Corbyn’s policies, claiming that they would result in
around £4,000 of extra debt for each person in Wales, and that the UK would end
up paying around £5.8 billion a year in additional interest payments if
Labour’s plans were implemented. It’s
the stuff of good political knock-about, but without a lot more information on
how they’ve done their sums (and the Tories don’t exactly have a brilliant
record when it comes to financial arithmetic), it’s difficult to
know what, if any, relationship exists between his figures and ‘truth’, in the mathematical
sense of the word.

But,
for the sake of argument, let’s suppose his figures are accurate ones. Is it really the economic disaster as which
he paints it? Of course, £5.8 billion
sounds like a very large sum of money to be paying in extra interest every
year, but that’s in absolute terms. And
it makes a number of unstated but implicit assumptions.

The
first comparison that has to be made is not, as the Tories effectively claimed,
with the status quo, but with what the outcome would be over the same period
with a Tory Government. The implicit
assumption in what Davies said is that Tory spending plans would not lead to a
similar outcome, but given the way in which out-turn has varied from predictions
over the last few years, and the way in which much of the (uncosted) Tory
manifesto has been ditched, that looks to me like an invalid assumption. If there is a gap between the likely outcome
under a Corbyn government and the likely outcome under a Tory government (and even
that is a significant ‘if’) then it is probable that the gap would be much
smaller than Davies is suggesting. All
the signs are that the Tories will also increase borrowing to pay for their
programme; the honest question is not how much Labour would need to borrow, but
what is the difference in borrowing levels between the two.

The
second question is about what proportion of GDP the debt would represent, and
what proportion of expenditure any extra interest payments would
represent. Both of those are dependent
on a range of assumptions and guesses about the likely level of inflation,
economic growth, and interest rates.
Given the propensity of all involved to get such estimates wrong, it
would be a very brave person who would claim to know the correct value of any
of those variables over a five-year parliament.
But in principle, simple mathematics shows that a debt which increases
in absolute value by a smaller percentage than the rate of economic growth will
end up reducing the ratio of debt to GDP, which is why the absolute value being
used by Davies is irrelevant. The same mathematics
also demonstrates that when interest rates are lower than the rate of
inflation, paying more interest in absolute terms can still result in a
reduction in the percentage of government income committed to paying interest.

What
we do know is that, as things stand today (and I accept that’s a very important
caveat), the UK Government is effectively borrowing money interest-free. It’s costing us, in real terms, absolutely
nothing, and given the demand from people who want to lend money to the
government, there is no immediate problem in borrowing more. Indeed, some would even argue that
increasing government spending actually generates more tax income than the
amount spent: the calculation all depends on the value assigned to the infamous
‘multiplier’.

Now
of course it is true that different economists will give different answers to
questions such as these, but that merely serves to underline that economists
base their predictions on models rather than on absolute truths, and there are
a number of different models available.
As the famous statistician, George Box, said, “All models are wrong, but some are useful”. It’s a point worth bearing in mind that when
politicians state categorically what the outcome of a particular policy will be
for the economy they are depending on a model of some sort, whether they admit
it - or even realise it - or not.

As I
said at the beginning, this sort of guff from Davies is all good knock-about
politics, but it’s really froth; he has no more clue than do I about the
accuracy of what he says. The real
question is why one particular model – the idea that the government is like a
giant household, which is used by the Tories when they come out with this stuff
– is taken as gospel truth by a media which regularly demands that politicians
from other parties explain themselves in the terms mandated by that model. It would be more useful to political debate –
let alone to economic policy – if the idea which underlies much of what they
say was challenged more forensically rather than being simply accepted. And it’s a shame that more opposition
politicians don’t appear to have the understanding or the confidence to do that.

Tuesday, 1 August 2017

The
increasingly public disagreements
within the UK cabinet would be funny if the issue weren’t so serious. Their attempts to claim that they’re saying
the same thing when they are very obviously saying something very different are
stretching the meaning of language considerably. Agreeing that ‘freedom of movement’ ends in
2019 because the EU rule no longer applies, but then arguing that ending compliance with the rule
does not mean that people will no longer be free to move for some years to come
is a distortion worthy of Orwell. And
even that distortion isn’t acceptable to the Foxes of this world.

It
isn’t only the Tories who are struggling, though. When John McConnell claimed last
week that Jeremy Corbyn and Carwyn Jones ‘are on the same page’, I surely wasn’t
the only one left asking myself whether they were indeed looking at the same page
number, but in completely different books. In a similar attempt at distorting language,
it seems that the claim is based on them wanting the same thing – the ‘exact
same’ benefits of membership of the single market. It’s just that half of them believe that they
can have that without being a member of the single market whilst the other half
have at least a nodding acquaintance with Planet Earth.

The
denied divisions are having a serious impact on both parties. On the government side the paralysis caused
by infighting and a lame duck Prime Minister is increasingly hampering the
government’s ability to do anything very much; and on the opposition side, some are even
starting to talk about splitting the party over the issue.

Margaret
Thatcher once famously said that her greatest achievement was New Labour; that
she had, in effect, provoked a change as a result of which the party became
little more than a clone of the Conservative Party. She didn’t do a lot for the Tories, though. She left them as she found them – bitterly divided
over Europe. It’s a division which has
haunted her successors. The Cameron-May legacy
doesn’t look to have done anything other than made that problem worse, although
perhaps they too will look to what they’ve achieved for Labour instead. Infecting that party with the same toxic
virus over Europe as their own party has suffered for many years is an
achievement, of sorts, I suppose.